Economyoverview:
The Peruvian economy has become increasingly market-oriented, with major
privatizations completed since 1990 in the mining, electricity, and
telecommunications industries. An austerity program implemented shortly
after the FUJIMORI government took office in July 1990 contributed to a
short-lived contraction of economic activity, but the slide came to a halt
late that year, and in 1991 output rose 2.4%. By working with the IMF and
World Bank on new financial conditions and arrangements, the government
succeeded in ending its arrears by March 1993. In 1992, GDP fell by 2.8%,
in part because a warmer-than-usual El Nino current resulted in a 30% drop
in the fish catch, but the economy rebounded as strong foreign investment
helped push growth to 7% in 1993, about 13% in 1994, and 6.8% in 1995.
Growth slowed to 2.8% in 1996 as the government adopted tight fiscal and
monetary policy to reduce the current account deficit and meet its IMF
targets. Growth then rebounded to 7.3% in 1997 even as inflation fell to
its lowest level in 23 years. Capital inflows surged to record levels in
early 1997 and have remained strong. In 1998, El Nino's impact on
agriculture, the financial crisis in Asia, and instability in Brazilian
markets undercut growth. While Lima publicly projects a rebound to 5% in
1999, private sector analysts believe this figure is overly optimistic.